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Term Structure Analysis of Option Implied Volatility in the Brazilian Market

Tipo
Papers

Ano
27/03/2017

Linha de Pesquisa
Administração e Economia de Negócios

Autor(es)
Carlos Heitor Campani, Carlos Eduardo Fucci

Orientador

https://doi.org/10.12988/ams.2017.7143

12414


Applied Mathematical Sciences, v. 11, n. 14, pp. 651-664. Abstract: This paper aims at predicting the volatility term structure of a given asset. The model is based on the GARCH modeling of the asset’s volatility, from which the term structure is derived. We test if the model is able to accommodate the term structure response to volatility shocks. Using data from two important Brazilian companies, the model indeed improved standard predictions for the volatility term structure by relating the size of the volatility shock to the maturity of the option used to estimate the asset’s volatility.

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